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"Housing affordability has improved dramatically because of declines in both prices and mortgage interest rates," said David Stiff, chief economist at Fiserv. "The monthly mortgage payment for a median-priced single-family home is now $700, compared to $1,140 in 2006 — a decline of nearly 40 percent.

Nationally, purchase mortgage payments now account for only 13 percent of monthly median family income, the lowest percentage on record (since 1971), and compared to 23 percent in the first quarter of 2006."

Price declines and low mortgage rates have resulted in a ratio of monthly mortgage payments to median family income that is the lowest on record based on Fiserv analytics . (since 1971)

Although affordability has increased, Stiff said, housing demand remains depressed with existing home sales back to 1998 levels, with the average annual rate trending at 4.3 million units since June.

Sales of existing homes rose 7.7% in August despite tighter lending standards and appraisal problems.

"Many households cannot finance first-time or trade-up home purchases to take advantage of lower home prices because of much stricter mortgage lending standards," Stiff said. "But even households with access to mortgage credit are hesitant to buy homes while job growth is weak and consumer confidence is low."

He said if economic growth picks up in the second half of 2011, the housing market would find a bottom and begin a gradual recovery.

With new housing construction at an all-time low and inventories of home inventory down 20%, lower levels of housing supply and rising demand next year will reduce downward pressure on prices. If homebuyers become more confident, many who are sitting on the sidelines should enter the market, causing prices to increase.

"We should not expect a rapid rebound in home prices," Stiff cautioned. "Very large inventories of foreclosed properties must be liquidated and absorbed before the healthy functioning of housing markets is restored. Potential buyers must be convinced that the economic recovery is back on track and that the double-dip in home prices is nearly over before housing demand will begin to rise."

Other highlights from the latest Fiserv Case-Shiller Indexes include:

• Prices dropped by double-digits in 30 metro areas, while 25 metro areas had small price increases of 1 percent or more.
• Between 2011 second quarter and 2012 second quarter, prices are projected to rise by double digits in only two metros (Madera-Chowchilla, Calif. and Carson City, Nev.) and decline by double digits in 16 metro areas (Naples-Marco Island, Fla.; Las Vegas-Paradise, Nev.; Riverside-San Bernardino-Ontario, Calif.;Miami-Miami Beach-Kendall, Fla.; Salinas, Calif.; Cape Coral-Fort Myers, Fla.; Crestview-Fort Walton Beach-Destin, Fla.; Orlando-Kissimmee-Sanford, Fla.;Bethesda-Rockville-Frederick, MD; Merced, Calif.; Detroit-Livonia-Dearborn, Mich.; Jacksonville, Fla.; Ocean City, N.J.; Port St. Lucie, Fla.; Phoenix-Mesa-Glendale, Ariz.; Palm Coast, Fla.)
• Projections for the following 12 months, i.e. the 2012 second quarter to 2013 second quarter period, illustrate why the housing market is poised to stabilize next year: home prices in 372 of the 384 markets are projected to rise in that time period, with only 12 markets expected to experience declines.
• California and Florida have borne the brunt of the worst declines in home prices. Of the 33 markets where homes have lost at least 50 percent of their value since peak, 28 are in the Sunshine and Golden States.
• In markets with the largest home price bubbles and crashes, improvements in housing affordability have been even larger. For example, the ratio of monthly mortgage payment to family income dropped from 32 percent (2006:Q1) to 11 percent in Las Vegas, from 42 percent (2007:Q1) to 19 percent in Miami, and from 59 percent (2007:Q2) to 27 percent in Los Angeles.

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